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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

When a business borrows money from a bank on a non-interest-bearing note, how are the bank discount and proceeds calculated?

To determine

State the way in which the bank discount and proceeds are calculated if a business borrows money from a bank on an interest-bearing note.

Explanation

Bank discount-Note payable:

Bank discount is the amount of interest subtracted by bank in advance from the principal amount of the note.

The formula to calculate discount amount on a note payable is as follows:

DiscountAmount=Maturityvalue(P)×Discountrate&

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